It’s Official, The Lockout Is Here

Ken Berger of CBS Sports – who has been covering the CBA negotiations as well as anyone – broke the news with a simple tweet not too long ago:

BREAKING: Owners have informed players they are locking out.

So here we are. The players union and owners haven’t found a middle ground on a labor agreement and we all suffer for it (and not only us, but a laundry list of employees from every team and arena as well as those in other professions whose positions are influenced by the operation of a multi-billion dollar sports league). And while we all saw this coming, it doesn’t make it any less a frustrating and sad day for basketball fans.

If you’d like some good reading on the issues, as well as proposals, here you go:

29 responses to It’s Official, The Lockout Is Here

I wouldn’t say “sad” so much as “infuriating”. I’m all for poor businesses suffering and losing money, but the owners who have grossly mismanaged their budgets and directly or indirectly caused these problems are not going to be the ones suffering the most. That irritates me.

I’m not a negotiating expert, but I think the fact that things will get “reset” in a way due to the official lockout prompts a bit of time to regroup and strategize. One style of negotiating for the pre-lockout situation, another for the present one?

My great fear is that there are a majority of owners who can use the lockout situation to actually improve their overall tax situation for this and next year. This is not the same thing as losing money, but means their incentive is to cancel the entire season.

If there is some way most of the mid level players could sign overseas contracts that wouldn’t abrogate their NBA contracts then I would feel the situation is somewhat balanced. Since that is probably not the case, I foresee a bloodbath for the players and the revenue sharing options not fixed. This would lay the groundwork for another work stoppage in the future.

It’s obscene to see millionaire players and billionaire owners sparring in this difficult economic times where the rest of the folks here in the real world are either under water or barely making ends meet.

#7 & #8. While I see that point (I made it earlier on twitter when saying I don’t think the NBA will lose any regular season games to this lockout), there’s more to it than that. Free agency is delayed. So are any trades. There won’t be a summer league. Players can’t have any interaction with their teams, even if that player is injured where he’d typically check in with the team’s medical staff to ensure proper progress. NBA websites won’t function as normal and there are already reports that commercials and media content that have players connected to teams will be removed from TV and web.

So, while I’m all for the idea that all we really need is an agreement in place by the time the season would start (or hopefully for guys to get in a training camp), it’s not like the lockout doesn’t have any affect on the league, its operations, or the fans.

The only way we don’t lose games is if the players cave, big-time. The owners, if they are losing money every year, have strong incentive not to have a season. Plus, many owners have other streams of income. Players, on the other hand, generally have no other forms of substantial income. Thus, the owners will have more money by not having a season (because they won’t be losing money), and the players will have less.

Zephid,
You are assuming the owners are losing money. When you take out the franchise purchase deductions and the player depreciation deductions the total NBA loss is much, much less.

Now you take the small market teams that are losing money and you get a different picture.

1) There is no question the players have to give back some cash to the NBA, but, I would posit, they should give back no more than the total league is losing after their deductions are removed. This would put the league at even.

2) Now the owners have to implement a decent revenue sharing plan – with a base salary component for the Donalds of the world – and the league will stand a fighting chance of remaining stable in the future.

3) The only thing left to argue over is how much the players should take of the increase in the pie the owners expect over the life of the contract. This can be lower than it is now because the owners do deserve to make a profit.

This is how you come to the percentage of the pie the players should get.

I do believe the players share should be calculated after some expenses are deducted – not off gross revenue – but it is also true that I believe the owners will always have some cash stashed away, at least in their secondary businesses, that never makes it to the total income line.

If the negotiations were to work in this three step process we could actually see some progress.

Of course much of this has been power plays – especially from the owner’s side, as they are the ones who want roll-backs (no matter how deserved they may be) – meaning we get very little information. This is no different from the front office handling of trades in the successful franchises, however.

11, that assumes you take the owners at their word when they say they are losing money…. which seems somewhat at odds with, say, giving joe johnson a max deal. these guys are billionaires. they have the best accountants in the world. when they give a max deal to someone, it is with some confidence that they will end up making money on the deal through ticket sales, beer sales, jersey sales, tv revenue, etc. that doesn’t mean some players aren’t busts – of course they are – but do you really think that when kobe was offered 30M for this year or whatever he gets, it wasn’t following a detailed conversation between the buss family and their accountants in which they were reasonably assured he was worth MORE than that?

This idea of the owners wanting to be saved from themselves is infuriating to me. I work in Hollywood, which also has some insane paydays, and the studios – like the NBA owners – always say they are losing money…. yet their behavior (which movies they make and how much they pay people) suggests the opposite.

Revenue sharing is a more complicated issue; but for me, the idea of a hard cap is just outrageous– you don’t think a player is worth that much money? Don’t pay him.

Craig – well said. I think there’s a fair number of owners, who do not want to get a deal done at this time. As much as I love the Lakers (and I’ve been a fan for a long time), ownership sent a strong signal by letting go of much of its workforce, well in advance.

Years ago, I was at a large company that merged with a smaller, but still important company. We all knew there would be a “black friday”, that a number of us would be let go in order to clear room. The CEO’s first move, was to fire his favorite young executive, a girl who had been his assistant and who was generally regarded as a rising star. His message was clear – ‘if I can fire my girl, none of you are safe’.

12, I would say to you that from a game theoretic sense, it doesn’t actually matter if the owners are actually losing money. All that matters is that they’re acting like they are. Thus, all their choices will reflect this belief, so they still have little incentive to begin the new season without significant financial guarantees.

Personally, I agree with you that the players should give up just a little bit in the calculation of BRI from some sort of net revenue as opposed to gross. However, I’m not sure how muddled the financial implications are and how many “deductions” will get thrown into those measures for the owners attempting to guarantee themselves profitability.

I believe revenue sharing must be done from a loss-preventative measure, thus the only time one team’s profits should be taken via revenue sharing should be when another team is taking substantial losses, and the unprofitable team should only receive as much as to offset their losses or less.

I believe a hard cap would ruin the game by making player movement almost impossible. I am firmly against any form of hard cap. What we have now works fine, IMO.

I believe more contracts should be more incentive-based, simply to prevent future Eddy Curry’s from ruining franchises. I believe the number of guaranteed years is fine, so long as the amount of guaranteed salary is lowered, at least mildly.

However, the players are working from a standpoint that they need to receive something for every thing they give. That’s not going to happen, since the owners are operating from a losing standpoint. Thus, the owners are looking simply to take, while the players are looking to give and take.

So either the players will cave and give, or we will have a protracted lockout.

I really don’t think the players expect to get anything from all this. They just want to minimize their losses.

I too oppose a hard cap. I am in favor of any caps being adjusted by some formula representing any gain/loss in BRI.

I think the total $ is where the players should concentrate their efforts and not get distracted by contract lengths. I think contracts actually should be shorter (your Curry example) and think this is a give area for the players.

From a practical standpoint, the revenue sharing has to be some formula, not something based on an owner’s profit/loss. The individual owners don’t trust each other for valid reasons – they all hide cash in different ways – and anything but a constant formula incentivizes each to try and cheat the others.

The owners have to devise some formula to punish the Donalds in the league and the minimum salary base has been the traditional way up-to-now.

The main reason I feel this will be a protracted lockout is that the owners do not want to address revenue sharing until they see how much they can ring out of the players and the players – fairly, in my mind – want to have the owners finish their revenue sharing plan, and announce it, before the negotiations are finished.

If there’s revenue sharing, I just hope they settle on a good formula. There are haves and have-nots, and we’re fans of one of the haves for certain.

Still, it takes more than just a big market to become a successful franchise. The Lakers and Clippers play in the same arena, same city, same media market, etc. Yet one has been better managed than the other, and they don’t seem to play in the same universe.

Same could be said about the Knicks and Nets. It’s one thing for the haves to give up a piece to help a franchise like the Pacers or Thunder, but let’s not go for the NFL driven parity model that negates a lot of the incentive for teams to put a good product on the floor.

If the Lakers or Heat sell more licensed products than others, they should keep their earnings. Fans wanted to buy a Lakers or Heat hat or shirt because they like the product those teams offer.

I hope that both sides will meet throughout the summer to get a deal done by the time training camps open and leave enough time for the free agency period so no game are missed. If past history is any indication both sides will probably meet again in early August. It looks like the NBA will lose any momentum they gained from the terrific seasons from the last few years.

One question, if games are missed will it help or hurt the Lakers with the new coaching staff and adjusting to a new offensive and defensive system?

20, players are not allowed any contact whatsoever with management or staff for the duration of the lockout, if my information is correct.

13, while I do believe some owners are losing money, I don’t believe it’s in the hundreds of millions that they would try and lead us to believe. However, as I said before, it doesn’t matter if they are actually losing money when it comes to resolving this situation; all that matters is how they act. If they make choices based on their status being that of losing money, the negotiations will proceed as such.

I do think, however, it is safe to say that no owner is getting rich via their basketball team (except maybe Sterling, altho who knows with all his lawsuits). So if they lose a season, it’s not as if the owners are losing their livelihoods; not like the players.

This situation is totally reverse from the NFL lockout. The NFL is really about greedy owners trying to get a bigger piece of an already pretty huge pie. They figure the NFL Players Assc. is at its weakest due to the death of Gene Upshaw and they decided to go for it.

The NBA situation is really the opposite and with only 7 profitable teams something has to be done. Teams can no longer pay long term guaranteed money to average/marginal players.
Luke Walton is an example that most Laker Fans are familiar with. Someone mentioned Eddie Curry and there are others out there.

So, really the NBA Players Assoc needs to get on board and understand that if they don’t give back a healthy portion of the BRI and control salaries then this league could be in some real trouble. The NBA more than any other league is a Players league and they do have the power but they must understand what will need to be done for the “greater good” of the league.

The good news is that all parties are experienced and pretty savvy. David Stern and Billy Hunter have been around a long time and I believe when it gets down to “crunch time” they will get a deal done.

I should have been more clear on my last post and stated that the free agency period will not start until a new CBA deal is done. In 1998 the NBA cancelled the preseason games once the lockout reached Sep 24.
No communication or use of team facilities is allowed between players and the team until a new CBA.

I am not a big Shannon brown fan but him opting out is probably bad for the Lakers. I would be shocked if there is something similar to a MLE in the new CBA meaning Brown will have to replaced by a rookie or minimum salary player

LordMo,
I think it is somewhat dubious that only 7 clubs are making money. That is a net amount AFTER tax calculations. If you run a business or have a lot of investment income you know that you calculate your budget based on your net income, NOT on your taxable income.

I do not doubt that some clubs are losing money and that the players will have to give back some of the benefits they have won in previous years, but do not take the owner’s (read David Stern) statements as fact.

The most aggressive owners are probably those that recently paid those enormous sums to buy into this little club.

P.S.
The owners may have opened their books to show their taxable income, but I do not believe they have yet shown the players any books showing what that tax computation was based on. It is like showing someone your final tax breakdown (1040 form), but not describing your deductions or included background forms (assuming here you itemize and don’t just take the standard deduction).

For those still citing the owners’ claims that 22 franchises are losing money, I suggest you go read the Larry Coon article that I linked to in the body of the post. He does a great job talking about the accounting tactics owners are thought to be using to come to their final numbers that determine profit vs. loss. Coon states:

The players association claims that the league is overstating its losses by mixing in costs associated with the purchase of teams with the profit and loss associated with the operation of those teams.

Another key passage from Coon:

But these statements also illustrate the accounting practices to which Hunter and the players association take issue. Brooklyn Basketball (the Nets’ parent company) paid $361 million for the team. In order for the balance sheet to balance, it had to show assets in that amount. Some of these are real, physical assets; accounts receivable; and the like. Other parts are “intangible” assets, which represent the amount the buyer paid above the value of the tangible assets. These assets (but not the franchise itself) are amortized over their “useful lives,” with a portion of their value (a total of $200 million for the Nets) counted as an operating expense each year. For the Nets this expense added up to $41.5 million in 2005 and $40.2 million in 2006.

The implication being that if owners are adding in these types of expenses to their overall costs, their losses will be overstated.

How can we equate a small market against a big market that will achieve parity? It’s highly improbable, isn’t it? Yet, San Antonio, a small market in Texas was able to make it work in a small way. They attracted good players and fans by winning the hearts of the Alamo City. Clippers are playing in the big market, yet they attract meager support from LA fans compared to other Western teams. As such, even on return on earnings it’s impossible to have parity that will equate Knicks to Wizzards or Bulls to Pacers. It all boils down on management from finances to front office in getting the right coaches, chemistry of veterans and rookies within their reach. There may be no parity in figures but passionate fans in a cozy small market could be developed.

On the other hand, players salaries have gone wild. We have a Commissioner who is motivated by ratings, big media and sports products practically buying the rights of players by overpaying them mortgaging fans’ passion and fandom. Well, we have today Time Warner agreed with the Lakers a contract of 3 billion for 20 years? Where is the league intervention on this long running contracts? Can Laker fans stomach the owner, Jim Buss for the next 20 years? How long did Dodger fans lasted with the McCourts? Unfortunately, these contracts are all legal and binding. On the team level, Lakers overpaid a bad player Luke for 6 long years who just showed his proficiency in passing the ball. I love Kobe but I think we also overpaid him @ 30 million plus annually in his last two years. Is this not too much in this day and age when people could hardly find a decent job? Of course, our Lakers is an example of a successful franchise who can afford to get into that. How can we expect now a small franchise like Memphis achieve parity in revenue sharing? Will the Lakers share their largess to small franchise? Like in any free enterprise, big becomes bigger and small companies try to become big. Not all big companies continue to be successful, at certain pointl they also mature, overspend, turns bureacratic and then decline. Again, this all boils down on management in sustaining success. So far the Lakers were properly managed by Dr. Buss and I’m not sure with the successors.

IMO, the first move of the impasse, they should elect a new Commissioner who will draw the line and introduce new rules for both players and owners.There has to be meeting of minds of what is at stake for all teams and players in consonance with the overall economic situation. Fans should be represented in all collective bargaining policies by both parties by asking this questions: Will fans adhere to this proposition?